So does the odd $2.5 billion really matter? Poor contracting strikes again …

November 10, 2015

$2.6 billion over budget, 7 years late in delivery … and that’s just the revised estimate. If only the Department of Homeland Security and the IBM Corporation had studied IACCM’s guidance on ‘the 10 pitfalls of contract management’ before they embarked on their project to automate major elements of the US immigration process.

Once again, we have the story of a technology project going badly awry. From initial cost estimates of $500 million and a completion date of 2013, the current projections have now climbed to $3.1 billion and delivery around 2020.

Reports in the Washington Post (November 9th, 2015) associate the problem directly with two of the IACCM top causes of value loss – failure to agree scope and goals and failure to employ the right form of contract. One can only assume that other principles of good contracting were also breached – for example, the quality of transition and on-going contract performance management must have been lacking for such a large problem to have remained hidden for so long.

Perhaps the only way to avoid these costly blunders is to convert the 10 Pitfalls into the 10 Commandments of Contract Management and to require obligatory sign-off of each element by the responsible contract owner in both buyer and supplier before they can proceed. It is otherwise remarkable that we see so many projects push ahead without clarity over goals or how they will be achieved or what governance and performance process is in place. I am sure there are many excuses – political pressure, the need to secure or retain funds, the good intentions of the parties to get started and sort it out later, the confidence of DHS in their supplier …. The thing is, we have seen and heard this so many times before and there are ways these pressures can be handled without jeopardizing success.

Good contract management is very cheap compared with losses and reputational damage on this scale.